How the Department of Labor Is Crushing American Samoa

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T he Department of Labor apparently has decided to foster chronic
unemployment in American Samoa, the tiny South Pacific U.S.
territory 2,,000 miles southwest of Hawaii. The Department on May
29th ordered the Samoan government to impose the same $3.35 an h o
ur minimum wage on local labor as is imposed on the U.S. mainland.
The order took effect on July 7th. With other countries in the
region paying less than $1 an hour, the economic effect in the
territory could be devastating. Island leaders predict that as many
as 2,000 Samoans, or nearly 20 percent of the entire workforce,
could be priced out of the labor market and lose their jobs. Reagan
Administration Labor Secretary William Brock, who has demonstrated
recently his sensitivity to the job-killing consequ ences of
federal rules, should reverse his Department's extremely unwise
ruling and give Samoans a chance to compete with their neighbors.

The economy of American Samoa depends heavily on government. Nearly
half the islands' 13,000-person workforce is empl oyed by the
government. Federal aid to Samoa per capita exceeds that to any
state on the U.S. mainland. Samoa's fragile private sector is
highly sensitive to wage differences between the South Pacific
islands. Two major U.S. tuna canneries constitute virt ually the
entire industrial output of the territory. These canneries, as well
as most other employers, have managed to keep wages well above than
those on nearby islands.

Under the Fair Labor-Standards Act of 1938, the Secretary of Labor
sets a minimum wag e in Samoa in accordance with the
recommendations of an "industry committee" he appoints. Congress
specified that the minimum wage rate in Samoa should be raised to
the mainland level but only "as rapidly as is economically feasible
without substantially c urtailing employment.... 11 Brock appointed
an "industry committee" to assess the Samoan wage situation. When
the. committee arrived in Samoa for hearings in April, its
chairman, then acting Assistant Labor Secretary Ronald St. Cyr,
declared: "I'm here to raise the minimum wage, so let's get on with
it." The economic consequences apparently were of little concern to
St. Cyr.

In May the committee recommended a general increase in rates to
the mainland level. This would boost Samoan wages between 19 percen
t and 129 percent depending on the type of employment. Despite the
vigorous protests of Samoan officials and island employers, the
Labor Department issued a wage ruling based on the committee
recommendations early last month.

This wage hike is proving to be the last straw for the private
sector. Workers in the tuna canneries already have begun receiving
pink slips. Almost 300 workers--a huge amount for Samoa--have been
laid off, and the firms have announced that they will move at least
part of their opera tions out of the territory. Potential foreign
investors have cancelled plans for expanding onto the islands.

it is ironic that it is American Samoa that is reeling under the
dead hand of the Labor Department bureaucracy. the territory in
recent years hasbe en taking firm action, in cooperation with the
Department of Interior, to reduce its dependency on the U.S.
government and to build up its private sector. Samoan Governor A.
P. Lutali has been pressing ahead with a vigorous program of
privatizing such gov e rnment activities as the port railroad, the
solid waste system, and the management of various facilities. so
impressive have been his steps to stimulate Samoa's private
enterprise that Interior Assistant Secretary for Territorial
Affairs, Richard T. Monto ya,, dubs him the "Ronald Reagan of the
Pacific." The Interior Department had intended American Samoa to
become a showcase of how private initiative could end dependency on
Uncl.e Sam--until the Labor Department stepped in.'

U.S. mainland minimum wage rates bear no relation to the
prevailing rates in the South Pacific. Rather than protect the
Samoan workforce, the mainland rate will create mass unemployment
and turn the struggling U.S. dependency into an economic basket
case.

while rejecting Samoan objecti ons to the new rule, the U.S.
Court of Appeals did rule recently that the Secretary of Labor can
amend the wage regulation if there is substantial cause. So the
ball is in Secretary Brock's court. He has said that he is anxious
to amend regulations that, w hile intended to "protect" jobs,
actually destroy them. To prove his sincerity, he wisely relaxed
restrictions on homeworki allowing mothers to work at home while
taking care of their children. He should show equal understanding
of the situation on Samoa and the perverse consequences a U.S.
mainland minimum wage can have on the economy of a tiny South
Pacific economy. He should allow American Samoa to continue its
progress toward economic independence.

Stuart M. Butler, Ph.D. Director of Domestic Policy Studies

For f urther information:

Warren Brookes, "Dependence Day in American Samoa?, The Washington
Times July 2, 1986.